The effects of ride-sharing

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MIGGY CASTAÑEDA

IN the last couple of years, commuters in Metro Manila have used ride-sharing apps like Uber and Grab in order to get around in relative comfort and safety – even if it may mean getting stuck in traffic.

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Many users will say fares are more stable with these ride-sharing services than if they took a taxi and there are also fewer concerns about the drivers and the condition of the vehicles. Malaysia-based Grab and San Francisco-based Uber pioneered the sharing economy in their respective regions, with Grab wholly operating in Southeast Asia.

The rise in popularity of Uber and Grab caused some feathers to be ruffled, with the Land Transportation Franchising and Regulatory Board (LTFRB) suspending approvals for franchise applications earlier in the year, and fears that both services might be taken away have been a concern. Transport officials, however, have denied that this is the case, but have slapped both companies with hefty fines for violations supposedly committed.

How does this affect me?

The LTFRB granted Uber, Grab, and similar services accreditation as Transport Network Companies. This means that they are allowed to operate in the country for two years, after which accreditation must be obtained in order to extend operations.

As of July 3, Grab drivers have been operating on a 45-day provisional authority grant, while Uber’s accreditation will end by August. In both cases, a hearing on the accreditation is currently ongoing.

There have been concerns regarding the relative safety and accountability of both companies, hence the decision to suspend applications for new franchises. Users may potentially lose the ability to commute in relative comfort and speed that the apps provide.

How does it affect businesses?

Big businesses such as car sales, insurance, and banking have been affected by the ride-sharing economy.

The rise of these apps have been correlated to the sharp rise of car sales, with a 27.8 percent rise in Q1 of 2017 for the passenger car segment. The insurance industry has also seen growth owing to the fact that cars used require a variant policy for personal accidents to protect both the driver and the passengers. Insurance companies across the world are also realizing that ride-sharing companies represent a brand new market to tap into, and are growing to fit these needs.

Banking has seen growth due to the need for financing the purchase of vehicles. A Carmudi white paper cited in 2015 stated that the lower interest rates and higher loan amounts made it more feasible for consumers to acquire loans for vehicles with a 26 percent growth year-on-year.

Final thoughts

It isn’t just the bigger businesses that are affected by the ride-sharing economy. Smaller businesses and freelancers contribute to it as well, inasmuch as needing to be able to take a car from one client to another, or ensuring that packages – through delivery services within the app – arrive on time.

For now, the jury’s still out on whether the LTFRB will clamp down on ride-sharing. In the meantime, passengers are still free to enjoy its convenience, and businesses continue to reap the benefits.

Miggy Castañeda writes about personal finance for MoneyMax.ph. He has also contributed pieces toYahoo! Philippines, ABS-CBN News, and Rappler.com. MoneyMax.ph is a financial comparison website aiming to help Filipinos save money through diligent comparisons of financial products.

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